Sunday, August 06, 2006

Cuban on bonuses

I pay bonuses based on the FINANCIAL success of the company first. If the company is making money. Actually cash flow positive, then Im always going to be open to paying bonuses that reward those that have earned rewards. If the company is making progress, but is not yet profitable, but on its way, then Im open to paying bonuses that are more in line with saying “thank you for sticking it out with me, together we are in the process of building a company. When i make money, you will make money”.

As Cuban rightly points out, many employees walk around thinking that when they do great things that they should get a bonus, not realizing that they were hired to do great things and paid a salary to do great things. Successful bonus programs frequently focus strictly on financial goals — EBITDA, sales targets, etc. — that provide positive cash flow and/or company profitability. Further, successful, financially-based bonus programs allow employees to know the status of their bonus potential at any point during the bonus period (quarter, fiscal year, etc.) by allowing those employees access to the financial numbers that drive their particular bonus. In an ideal world, doing great things leads to financial success or will lead to financial success, which should lead to bonuses.